F.A.Q. ON SCHEME FOR WAREHOUSING IN RURAL AREAS

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Business Mantra: Faridabad

In India, 25-30% of the food grain is wasted due to lack of/poor storage facility.  The basic necessity for marketing of Agricultural products is to have a proper storage and warehouses. In India there is storage capacity of around 112 Million Metric Tons (MMT) and there is a need of further capacity of warehousing for 40 MMT.

Thinking of warehousing in rural area, certain questions come to the mind of common man. Let us study warehousing in rural area for the knowledge of the common man.

What is the name of the scheme?

Since 2014 warehousing scheme comes under Agricultural Marketing Infrastructure (AMI) which is sub-scheme of the Integrated Scheme for Agricultural Marketing (ISAM)

Which Department and Ministry issued the notification and is having control on AMI?

Department of Agriculture under Ministry of Agriculture, Government of India implemented this scheme and is controlling ISAM.

What is the need of warehousing in India and what action is required to be taken?

To safeguard the interest of the farmers of the country, specially the small and the marginal farmers who do not have the facility to store their output/produce to get better prices, AMI has the answer. Where food grain becomes stale and is destroyed due to lack of /poor storage facility and the capacity to store does not permit further storage, new warehouses are to be constructed directly in the rural area for storing food grains etc. In India 70% of the storage facility is with Food Corporation of India (FCI), Central Warehousing Corporations (CWC), State Warehousing Corporations (SWCs) of various states, which is being used by the agencies themselves or the traders. Farmers are not using this facility at all. The state of these warehouses is also at the mercy of their officials. To implement AMI. The objective of the Ministry of Agriculture is:

  • Development of Marketing Infrastructure for managing surplus of agricultural, horticultural products and also allied products such as dairy, poultry, fishery, livestock and minor forest produce.
  • To develop scientific ways of storage using latest technology.
  • To help in increasing farmers income by removing intermediate channels by direct marketing.
  • Create an atmosphere of competitiveness by encouraging co-operatives and private players.
  • To reduce post-harvest losses due to wastage and reduce the adverse effects of mishandling of products.
  • To bring general awareness amongst the farmers by way of trainings etc.
  • Farmers to get proper price of their produce, which should match with the quality, grade and standardization. Need based finance facility as to increase output and resulting in increased income of the farmers.
  • To help the farmers adding value to their produce like, cleaning, sorting, washing, ripening, waxing, packing and labeling by grades of their produce.

How the expansion in this area can be done?

In India 35 MMT warehouse is immediately needed and in the years to come, 8MMT capacity is to be added every year. It is not expected that FCI, CWC or the SWCs shall take the lead to expand the capacity of warehouses. So the private players and the co-operatives may come forward to work in this field. To encourage the private entrepreneurs and the co-operatives, government has to allow subsidy on construction of warehouses and creating infrastructure in the field of storage.

What are the facilities of availability of finance?

Financial institutions, banks have been instructed by the Ministry to be liberal in financing the ware-housing in rural areas. Ministry has set certain guidelines for construction of warehouses,

for which, to be eligible for subsidy, the capacity of the warehouse should be between 50MT to 30000MT and the subsidy available as per the following chart:

(Source: Operational Guidelines, 2014)

 

 

 

Category

Rate of Subsidy (on Capital Cost)  

Subsidy Ceiling

 

Up-to 1000 MT in Rs./MT More than 1000 MT & up-to 30000 MT in Rs./MT Maximum ceiling

( Rs. In Lacs)

A)    North Eastern States, Sikkim, UTs of Andaman & Nicobar and Lakshadweep Islands, Hilly Areas# 33.33% 1333.20 1333.20 400.00
B)    Other Areas
1.      For Registered FPOs, Panchayats, Women, SC, ST beneficiaries or their Co-operatives##/ SHGs### 33.33% 1166.55 1000.00 300.00
2.   For All other categories of beneficiaries other than the above 25% 875.00 750.00 225.00

#          Hilly Area is defined as the place more than 1000 m above sea level

##        SC/ST Co-operatives to be certified by State Government’s Social Welfare Department

###      Self Help Groups as defined.

Even for repair of the warehouses, there is a subsidy of 25% of the project cost appraised by financial institution with a maximum ceiling of Rs.187.50/MT of storage capacity.

It seems that this scheme is only for warehousing, what about the other infrastructure projects?

There is also subsidy on other infrastructure schemes like mechanical handling of collection/assembling, drying, cleaning, grading, labeling packaging, ripening, sanitary and phyto-sanitary measures, waxing, value addition facilities etc. of the agricultural products. Following are the rate of subsidies:

 

Category

Rate of Subsidy (on Capital Cost) Maximum Subsidy Ceiling (Rs. In Lacs)
A)    North Eastern States, Sikkim, UTs of Andaman & Nicobar and Lakshadweep Islands, Hilly Areas 33.33% 500.00
B)    Other Areas
1.      For Registered FPOs, Panchayats, Women, SC, ST beneficiaries or their Co-operatives/ SHGs 33.33% 500.00
2.   For All other categories of beneficiaries other than the above 25% 400.00

What further procedure is to be adopted and how to apply for loan and subsidy?

An individual, group of farmers/growers, FPOs (Farmer Producer Organizations), Proprietary and  Partnership firm, corporates, NGOs, SHGs, Co-operative concerns, Co-operative Marketing, government bodies, local bodies but not municipal bodies, Panchayats, state agencies which include departments, corporations, marketing boards are eligible to apply for loan. Here the applicant has to bring minimum 20% of the project cost as margin money for the loan, 50 % of the project cost is granted as loan by the financial institutions/banks even NABARD can finance directly or indirectly. State Finance Corporations can also finance such projects. There is a subsidy ceiling for warehouses up-to 30000 metric tons.

Which is the nodal agency for such projects?

NABARD has been chosen as nodal agency for the projects, but where the projects have been promoted by co-operatives, the nodal agency for those projects is National Co-operative Development Corporation (NCDC). If the projects are promoted directly by the state governments then the nodal agency shall be Department of Agriculture and Co-operatives (DAC). The subsidy shall be released by nodal agency as the case may be.

Are these projects available on owned land only?

Normally this project should be established on owned lands by the promoters, yet it may also be established on leased land and the lease of land should not be less than 15 years

For further detailed study http://www.agmarknet.nic.in/amrscheme/ruralhead.htm may be followed under the head “Revised Operational Guidelines of the Scheme”

Author: Lalit Virmaani Author is an Ex-Banker (Retired Senior Executive from a Leading Nationalized Bank) Presently a Finance Consultant

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